Honeywell International Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide a clear standalone Q4 financial summary. Honeywell is a diversified industrial company operating through Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales | $36.662 billion | $35.466 billion |
| Net income attributable to Honeywell | $5.658 billion | $4.966 billion |
| Diluted EPS | $8.47 | $7.27 |
| Operating cash flow | $5.340 billion | $5.274 billion |
| Capital expenditures | $1.039 billion | $0.766 billion |
| Gross margin | 37.3% | 37.0% |
| Cash and cash equivalents, including short-term investments | $8.1 billion | $10.1 billion |
| Total borrowings | $20.4 billion | $19.6 billion |
Sales increased 3% as reported, driven principally by higher pricing; volume was flat and foreign currency translation reduced sales. Net income rose about 14% and diluted EPS about 17%. Gross margin increased 30 basis points. The filing attributes EPS improvement to higher segment profit, lower repositioning and other charges, higher interest income, and a lower share count, partly offset by higher interest expense.
Segment results were mixed: Aerospace sales rose 15% to $13.624 billion and segment profit rose 16% to $3.741 billion; Building Technologies sales increased 1% to $6.031 billion and segment profit rose 5% to $1.505 billion; Performance Materials and Technologies sales rose 7% to $11.506 billion and segment profit rose 8% to $2.549 billion. Safety and Productivity Solutions sales fell 21% to $5.489 billion and segment profit fell 17% to $901 million, reflecting weaker warehouse-project and product demand.
Cash, debt, and capital allocation
Operating cash flow was nearly flat year over year despite higher net income. It included a $1.325 billion payment under the NARCO buyout agreement; working capital also reflected increased inventory purchases. Investing activities used $1.293 billion, including $718 million for acquisitions. Financing activities used $5.763 billion, including $3.715 billion of share repurchases, $2.855 billion of dividends, and $1.731 billion of long-term debt repayments, partly offset by $2.986 billion of debt issuance.
Current liabilities were $18.539 billion versus current assets of $23.502 billion at year-end. Debt included $2.083 billion of commercial paper and $1.796 billion of current maturities of long-term debt. The company reported $8.1 billion of cash and short-term investments, including $5.9 billion held by non-U.S. subsidiaries, and stated that it expects operating cash flows, cash balances, credit facilities, and capital-market access to meet liquidity needs. It had $7.1 billion available under its share-repurchase authorization. Moody’s outlook was positive; S&P and Fitch outlooks were stable.
Outlook, material items, and risks
- Backlog was $31.777 billion at year-end, up from $29.558 billion; Honeywell expects to recognize approximately 60% as revenue in 2024.
- For 2024, the company expects approximately $1.1 billion of capital expenditures and plans to spend $5.0 billion to acquire Carrier Global’s Global Access Solutions business, subject to customary closing conditions and regulatory approvals; closing was expected by the end of Q3 2024. The company also intends to continue quarterly dividends; the rate increased 5% to $1.08 per share beginning with the Q4 2023 dividend.
- Beginning in Q1 2024, Honeywell will reorganize its reporting segments into Aerospace Technologies, Industrial Automation, Building Automation, and Energy and Sustainability Solutions. Management said the change will not affect historical consolidated financial position, results, or cash flows.
- Repositioning and other charges were $860 million, down from $1.266 billion in 2022. 2023 repositioning actions included workforce reductions of 5,854 positions. The company also incurred a $1.325 billion NARCO buyout payment; proceeds from the HWI sale totaled $275 million in 2023.
- A significant estimate change increased the Bendix asbestos liability: Honeywell shortened its claims-resolution look-back period from five years to two, recording a $522 million expense in 2023, including $434 million primarily associated with that methodology change. Year-end asbestos liabilities were $1.644 billion, with $211 million of related insurance recoveries.
- Key exposures include macroeconomic and geopolitical volatility, supply-chain constraints, material and labor costs, foreign exchange, demand weakness in certain end markets, cybersecurity and operational disruption, environmental remediation, asbestos claims, and changing regulation. Management said raw-material constraints may continue in 2024 but did not anticipate a material adverse impact from shortages based on current mitigation plans.
- The filing identifies long-term contract revenue recognition as a critical audit matter because estimates of total contract costs require significant judgment. The auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective; the acquired Compressor Controls Corporation was excluded from the control assessment.
Most important facts for investors to verify
- Whether the large backlog converts on schedule and supports the expected 2024 revenue mix and margins.
- Whether Safety and Productivity Solutions demand stabilizes, and whether growth in Aerospace and Performance Materials and Technologies continues.
- Funding, regulatory approval, closing timing, and expected returns for the $5.0 billion Carrier Global access-solutions acquisition.
- Future Bendix asbestos claim volumes, resolution values, insurance recoveries, and the sensitivity of the liability estimate to the two-year look-back methodology.
- Debt maturities, commercial-paper access, cash deployment, and the effects of supplier-finance program balances; $1.112 billion of accounts payable related to suppliers using the voluntary program at year-end.
- Execution and comparability of results following the 2024 segment realignment, as well as the effects of ongoing repositioning and supply-chain risks.